NOTE 18 – STOCK-BASED COMPENSATION

Our Amended and Restated 2008 Incentive Compensation Plan (the “ICP”), which was shareholder-approved, permits the grant of share-based awards to its employees. At December 31, 2017, 4.8 million shares were available for issuance. The granting of awards to key employees is typically in the form of restricted stock awards or units. We believe that such awards better align the interests of our employees with those of our shareholders. Total compensation cost that has been charged against income for the ICPs was $6.3 million in 2017, $7.3 million in 2016, and $4.3 million in 2015. The total income tax benefit was $2.4 million in 2017, $2.8 million in 2016, and $1.6 million in 2015.

Restricted Stock Awards

Restricted stock awards require certain service requirements and commonly have vesting periods of 3 years. Compensation expense is recognized on a straight-line basis over the vesting period. Shares are subject to certain restrictions and risk of forfeiture by the participants.

A summary of changes in our nonvested shares for the year follows:


(shares in thousands)	Shares			Weighted Average Grant-Date Fair Value
Year Ended December 31, 2017
Nonvested balance at beginning of period		401		$	13.31
Granted during the year		211			17.61
Vested during the year		(194	)		13.50
Forfeited during the year		(11	)		14.97

Nonvested balance at end of period		407		$	15.41

As of December 31, 2017, there was $3.9 million of total unrecognized compensation cost related to nonvested shares granted under the ICP. The cost is expected to be recognized over a weighted-average period of 2.0 years. The total fair value of the shares vested was $3.4 million in 2017, $3.8 million in 2016, and $1.6 million in 2015.

Restricted Stock Units

Restricted stock units require certain performance requirements and have vesting periods of 3 years. Compensation expense is recognized on a straight-line basis over the vesting period. Shares are subject to certain restrictions and risk of forfeiture by the participants.

A summary of changes in our nonvested shares for the year follows:


(shares in thousands)	Shares			Weighted Average Grant-Date Fair Value
Year Ended December 31, 2017
Nonvested balance at beginning of period		821		$	12.02
Granted during the year		278			16.31
Vested during the year		(74	)		13.47
Forfeited during the year		(192	)		12.09
Dividend equivalents adjustment		16			13.19

Nonvested balance at end of period		849		$	13.30

As of December 31, 2017, there was $3.7 million of total unrecognized compensation cost related to nonvested shares granted under the ICP. The cost is expected to be recognized over a weighted-average period of 1.8 years.

Stock Options

Option awards are generally granted with an exercise price equal to the market price of our Common Stock at the date of grant; these option awards have vesting periods ranging from 3 to 5 years and have 10-year contractual terms.

Old National has not granted stock options since 2009. However, Old National did acquire stock options through prior year acquisitions. Old National recorded no incremental expense associated with the conversion of these options.

A summary of the activity in the stock option plan in 2017 follows:

Weighted

Average

Aggregate

Average

Remaining

Intrinsic

Exercise

Contractual

Value

(shares in thousands)

Shares

Price

Term in Years

(in thousands)

Year Ended December 31, 2017

Outstanding at beginning of period

694

15.27

Exercised

(193

)

14.01

Forfeited/expired

(276

)

18.89

Outstanding at end of period

225

11.92

1.66

1,436.0

Options exercisable at end of year

225

11.92

1.66

1,436.0

Information related to the stock option plan during each year follows:


	Years Ended December 31,
(dollars in thousands)	2017		2016		2015
Intrinsic value of options exercised	$	806	$	660	$	458
Cash received from option exercises		2,655		2,349		997
Tax benefit realized from option exercises		318		264		159

As of December 31, 2017, all options were fully vested and all compensation costs had been expensed.

Stock Appreciation Rights

Old National has never granted stock appreciation rights. However, Old National did acquire stock appreciation rights through a prior year acquisition. Old National recorded no incremental expense associated with the conversion of these stock appreciation rights. At December 31, 2017, 0.1 million stock appreciation rights remained outstanding.

Outside Director Stock Compensation Program

Old National maintains a director stock compensation program covering all outside directors. Compensation shares are earned semi-annually. Beginning in 2017, any shares awarded to directors are anticipated to be issued from the ICP. Approximately 20,000 shares were issued to directors in 2017.